The Hidden Lawsuits in Your Hiring Process: Background Screening Compliance Explained | Honest HR

Legal risk in hiring doesn't start with the background check. It starts way earlier. So, let me ask you this. How confident are you that your hiring process is 100% compliant? A single misstep in a job posting, an interview question, or even how you reject a candidate can quietly open the door to a lawsuit. So, today we'll pull we're pulling those compliance risks out into the open. Welcome to our very first live audience recording of Honest HR at Talent 2026 in Dallas, Texas. I'm your host, Monnique Aandbi. Let's get honest. Today we're joined by Deb Keller, president and chief compliance officer at Vict TIG background checks. Deb has trained over a 10,000 human resource professionals across the country, sharing her knowledge of strict legal hiring practices. Welcome to Honest HR, Deb. — Hi. It's so great to be here. Thank you everybody for having me. — So Deb, before we get started and or get into the mechanics, let's start with the stakes. When organizations get background screening and hiring compliance wrong, how common is litigation and why are employers vulnerable in their process? — That's um that's a big question just straight out of the gate. Um, first of all, I've been doing this for about 15 years in background screening and I have never seen as much litigation as I have probably the last five years against employers. Um, also there was a time where if you weren't a, you know, a mega company that had a recognizable national name, you were pretty safe. People didn't go after small and medium-sized employers. But unfortunately, that is no longer the case. You can even be a school and get sued. So the two biggest areas where I'm seeing that employers are vulnerable are related to states and municipalities, even cities are all making up their own rules now. So that's a category and that's really hard as an employer to keep up with that. You know, I mean enough things are changing in HR as it is with AI for example. So, it's pretty difficult for HR professionals to know what's going on in, you know, 50 states if you happen to be a multi-state employer. So, that's one area. The other area where we're seeing the most litigation and risk is related to what we call FC violations. And the FC in short, and don't worry, I won't get on a soap box about the FC because I could, it regulates everything to do with the screening process. So that could include any number of things, but one of the biggest areas that we're going to talk about in just a little bit would be the federal adverse action process. And the reason you're at such great risk, and I will probably say this multiple times because I say it in my head all day, but chat GPT is not your friend in background screening. AI is not your friend. pretty much anything else. You know, you can figure out how to fix your own washer these days, but you do not use uh any type of AI or, you know, chat GPT to figure out your answer to a background screening question. We've I personally have tested it and it's just flat, dangerous, and wrong. So the reason I say that if you don't have your own FC council or a really good screening firm that focuses on compliance and keeps you up to date and provides you know applicable forms then you are at risk. So it is a big deal more and more litigation. — Okay. So you said too and we're in a very latigious world today. So I agree. Um so multi-state laws um which one of the things I actually love about SH membership is that we have an interactive tool um that's available to our members where you can select if you have operations in multi-states. We call the it's the multi-state law comparison. So it's a really easy way for you to see in the states that you have operations what the what laws and you can select which laws you want to apply to those states and it gives you a sidebyside comparison of that. And then you said FC, right? So, Fair Credit Reporting Act. Okay. — Yes. That's an excellent tool. I'd forgotten about that. — Yeah. So, let's get into how this actually plays out in practice. So, you said that compliance actually begins before the background check is ever run. What is the first exposure to risk and why? Well, it's kind of one that I don't think that I typically would have thought about prior to doing what I'm doing, but it actually starts with how

you post your job ad of all things. So, there's a little thing called the 2012 EEOC guidance that we're going to talk about more um related to the use of criminal records in the background screening process. Well, 14 years later, people are still trying to figure out what the heck it means. How does it apply to you? and so on. But one of the key ways that it applies starts with that first communication with the applicant. So for example, um the guidance made it um made it not compliant to make blanket statements like we don't hire felons or um you know no must have a clean criminal record. And I always check before I speak each year like typically at the national conference to see and there are still you can pull up any kind of job forum like you know monster or whatever the most popular one is these days. I don't think it's monster so that tells you a little data there but you can look at any job platform and you will see in job ads that people will employers are still putting must have a clean criminal record. you know, you can't do that anymore. You cannot say that because if you are saying that in that job ad up front, that implies that you are not doing what is called an individualized assessment. We're going to talk more about individualized assessments more in depth. But in general, what it is putting a message out, we're just going to say no because you have a criminal record without even giving consideration as to what that record is. Okay? And that's a big no no. And then the second part of the job ad, and this is just it amazes me what cities are doing these days. New York City, for example, is one that sticks in my mind that I see a lot where you have to either have the exact salary posted for the job in your job posting or you're nodding, you know exactly what I'm talking about, or some states will also require a range be posted in the job ad, which is something, you know, 10 years ago, I at least wasn't thinking about that, and now we all need to think about that. And then if I could just make um a minor suggestion, I would strongly suggest just to protect yourselves that you put in the job ad um you know this company, you know, SHERM follows all EEOC guidance and federal and state laws regarding uh background screening. Just put that in there and that's just kind of a little, you know, protection for you, letting the applicant know that you are aware of what your obligations are and that you're following them. So long answer to a short question. — No, that's really great. So you it starts with the job posting, right? I mean, and it amazes me that we still have employers that will make the statement of you have to have a clean background in order to apply or be considered for the position. — What is a clean background? So I do see that still all the time. — Yep. So along those lines, ban the box laws are now active in numerous states and municipalities. Um, we're going to open the floor to our audience really quick. Raise your hand if you work in a state with the ban the box law. Awesome. So for audience members who may not be familiar, can you explain what these laws require and how they have changed the interview process and the job application itself when um and where we're seeing the most common mistakes? — Absolutely. So ban the box um is growing every year uh or the movement is growing every year. So first let me define um there are two categories of ban the box law. There is a public segment and if you all work for um you know a city, state, government, municipality, anything like that, you are on the government side on the public sector. What probably many of you or most of you are private employers and it depends on the state, but private employer laws typically kick in at either five employees or 15 employees. And I want to share a resource with you out of the gate before I define even what the law is. It's called NELP, National Employment Law Project. And you can find them at nep. org. And it's just a nonforprofit organization. I have no affiliation with them whatsoever, but it is my go-to resource. It is that good that I am checking NELP to see if something has changed because these laws are changing frequently. — So, what the heck is Ban the Box? Ban the box refers to the question on the job app that we've all seen. Many of you probably still have it on your job app that says, "Have you ever been convicted

of a criminal offense? " Or, "Have you ever committed a crime? " You know, "If so, tell us what it is. Have you ever committed a felony? " Any variation of that. So, if you're in a ban the box state, you can't have that on there. That question needs to go away immediately. If you are not in the ban the box state, I still personally suggest you remove it. You don't have to, but I think that's where the movement is going with more consumer protection. And the whole reason that ban the box was created, it was started from actually a grassroots uh movement of some kitchen people sitting around a kitchen table. And I love this story where people were kind of brainstorming and trying to figure out what they could do to help their friends and family members who had been incarcerated get back into the job market without immediately having that employer perception that well I'm not going to hire that person. Have you been convicted of a crime? Yep. Throw that one, you know, in the trash. And that was very real. You know, I hope folks aren't doing that now because if you are, you're going to have a problem. But that was a very real situation. So that was the purpose of Ban the Box to get employers to stop being prejudiced against applicants before finding out more about them, more about what that conviction actually was and is it relevant to the job they have at hand and performing what is called an individualized assessment, which I think we'll get into shortly. Mhm. — And then in the interview process where it affects things is um you really should not I don't recommend asking in the interview process at all. Okay? That's just my personal opinion. It's not legal advice. However, if you're in the ban the box state, you need to check and see what that state says. Look at nelp. org and see what it says. Traditionally, you should not ask until after the job offer has been made. Um, some states say it's okay to ask after you've had the first full interview with the person, but what you don't want to do in any state is start out of the gate, you know, in your first communication, have you been convicted of a crime? Because you might as well put it on your job application. So, those are the primary areas. And in terms of where I'm seeing violations, it's people not getting it off their job app or thinking it didn't apply, you know, to them. I'm like, "Oh, I didn't know our state banned the box. " So, and it's a big deal. You can be fined and penalized as an employer. — I actually remember a few years ago when I practiced HR and I was a part of the senior leadership team having this discussion with our board of directors around banning the box because when I joined the organization and this was years ago, over a decade ago, um the we had that as a question on the job application. So I remember vividly, you know, having that conversation and the decision before it was a requirement. We were a little proactive. We went ahead and removed it from our application. And it's good to know to ask the question after the offer is made, not in throughout that process, but after the offer has been made. — Yes. And that's excellent for your former organizations who did that. — Yeah. — AI is accelerating. Regulations are shifting, but expectations aren't slowing down. Sherm 26 is where HR leaders get clear on what to do next and how to do it. Prices increase May 16th. Register now at sherm. org/sherm26. So, we've covered job ads, job applications, and interview process. Um, could you tell us about FC violations when obtaining applicant consent to run the background check? And is this big a big area of concern in litigation? — How much time do you all have? What is our time limit on this podcast? I because I kid you folks, not I have done whole sessions just on this. So, I'm going to pair this down as much as I can. — This is one of the top two areas of litigation against employers. And this is one of my favorite things to talk about is because it is so preventable. You do not need an applicant suing you because of the way you gained their applicant consent. But the problem is typically you are using probably your background screening firm using forms that they have provided you most likely online for your applicant in a portal of some sort or you may still be doing it a little um of the older school way with you know hard copy forms which is okay too. That's still okay. Even though it's not convenient it's still legal to do that. Um and one of the problems is these forms have changed tremendously just in the last five years or so. 10 years ago it was okay to combine different forms together for example and

you cannot do that at all now. So I want to start and this is going to be a bit of an answer. Okay. — Oh go ahead. — We have got to serve our audience here so they do not get sued for applicant issues. So it starts let me just start with like some of the um some of the rules themselves. So what I see on my side like after I'll do a conference like this I will offer to do a compliance review for any SH members and I would if it's okay to do it now like to go ahead and make that offer to everyone. I'd be happy to review your forms if you're a SHM member. No cost, no obligation just as part of my job as a speaker. You're welcome representing SHM. I've done it for years. I love it and I humbly think I have helped a lot of people not get sued. Yes, I hope so. But anyway, it starts with the first thing you need is just called a disclosure regarding background check. A single page and it stays by itself and it has about this much language on it. Little bitty tiny paragraph that says we are going to run a background check on you. Here's what we're going to include in that. And here's the name of the background screening firm and their contact information who will be conducting that background check. Okay, that's all it says with a signature and a date from your applicant. That's it. I see forms where people are wanting to roll in their own language regarding, you know, their policy or onboarding or, you know, 10 other things they want to use in that document. If you falsify your answers, you know, you'll be terminated. No, these are highly legal, regulated, restrictive documents and less is more. Okay, so those are the key things. So you've got your disclosure regarding a background check. Second thing you need regardless of state is called an applicant authorization and acknowledgement form. That form is letting the applicant know uh here are the forms that we you are acknowledging that we gave you these other forms and we're going to talk about the other forms here too. And you are now giving us your permission to run that background check. That's it. So you didn't even ask for permission in the first form. You're just disclosing that you're going to run it. Second form, you're getting permission. Again, a very small amount of copy. Third form, if you're in California or if you are running uh employment um employment verifications with your screening firm, then you also need to have uh an additional investigative consumer report disclosure. And that talks more about that and it not being a criminal record investigation, but a different type of investigation. Mhm. — So now we're up to potentially three forms, two for sure, potentially three. — Then you also need to include what is called the FC summary of rights. — Okay? That comes from the Consumer Financial Protective Bureau and it tells consumers what their rights are related to anything to do with their consumer information. Okay? And then last but not least, there are many states now that have their own state summary of rights or their own article like article 23A if you're in New York. Um 1732 something if you're in California. So there are other state forms that may be applicable depending on where you are. So those are the forms. Okay. So that's the basics. Some other things I have to say, these forms are so ligious that if you included what a court could call extterraneous copy or superolous information that was not solely related to saying we're going to run a background check on you here. we're going to get your authorization and so on. You will have you will be violating a consumer's rights and it's up to a judge to determine what kind of award they would give a consumer. But I can tell you consumers are suing for this. They are more educated. There are actually plaintiffs at plaintiff's councils out there of attorneys who are looking for applicants who um may have been harmed by a company related to the background check. I've even seen commercials in larger cities traveling. It's kind Yeah. — Throw a billboard up, right? — Yes. Oh, no. there are billboards and you can find um you can find legal counsel websites where they're recruiting applicants so they can come after you the employers. — So these forms are super important and the last thing because I as I warned you this is a whole session just this topic. The last thing I will say is you um each one of these forms has got to stand alone as the FC says. So you cannot have your disclosure combined with your authorization and acknowledgement. That is the most common mistake I see when I

leave conferences and I connect with folks who send me their form. That alone can get you sued. Now have to say one more thing if you if I may. you are depending on a screening firm primarily unless you uh are large enough to have specific FC counsel, not just employment law counsel because we're talking two completely different niches. — And if you're depending on your screening firm for these forms, which most employers do, you have a burden to make sure that screening firm is keeping up to date with the changes that are happening in those forms. And changes do happen. and they've changed a lot since I entered the industry. But here's the kicker, and I love to see people's faces, and I can't see your face because the bright lights, but um the issue is the background screening firm is not obligated to give you any forms, not these forms, not adverse action forms. So even if they offer them to you as part of their platform or their background screening system, they're not obligated to keep them up to date. They don't have to tell you what they've done or not done. So, please do your due diligence and ask your firm, you know, when is the last time you had your forms checked? How do you know these are correct? Do you employ FC counsel or are you just kind of winging it? — Because there's no repercussion for the screening firm. You're the one that gets sued, not us, which is not right, but it's the way it is. And I've seen it happen many, many times. I've actually met folks before um at national some years ago. I met someone who has since become a very good friend and she said, "I literally wish I had gone to your session prior um to this happening, but we are a high-end, very large grocery chain and we are paying a little over a million dollars in a class action lawsuit because we had all of our forms on a kiosk in the grocery store and applicants were going up and filling out, you know, the consent right there and it just scrolled from one form to another and there weren't breaks where each document was solely on its own page. That alone got them sued for just over a million dollars. — Wow. — So, this is real. This is not, you know, a fear podcast, but I've seen this happen. And that, you know, that happened to be a large company, but it's happening to companies of all sizes, but — it's the reality of it. So I'm tracking five forms and I can see for the sake of streamlining processes where you would want to combine but in this case they have to stand alone. — Absolutely have to. — Waiting for your career to take off? Well, don't. With Sherm certification, you earn more, get promoted faster, and lead with confidence. This is your sign to act. The best workplaces are led by SHM certified experts. If it's a work thing, it's a sherm thing. So, Deb, you've run the background check and your applicant has a criminal record and you want to resend the offer. — I love the look on your face. — What steps should an employer follow to do this compliantly? And is there I mean, and is this where the EEOC guidance of 2012 and those individualized assessments you spoke about come in? Yes, they will come and get you is what they will do. So, so exactly what you just said and thank you for paying attention to what we just answered previously. But the first thing you need to do is conduct an individualized assessment. Now, if you're in a ban the box state or a fair chance act state, you have to do that very formally in a documented process. If you're not in a regulated state, you still have to do it as part of your due diligence. So what you start with is looking at that criminal offense. Okay? So you get the background check back. Somebody has a felony theft charge for example. You are a bank. You clearly that is not going to be a good fit for your organization. You can demonstrate the risk. But there are a lot of offenses where you might not be able to. So what the law or the regulations want you to do is to look at that offense. Look at what they call the nature and the gravity. So, are we talking shoplifting or are we talking armed robbery or a sex offense, something more serious? — Look at how long ago it was. Was this, you know, is this a 12year-old misdemeanor um marijuana charge or is this a three-year-old, you know, violent assault where someone was just released? So, look at the time since it occurred. And then the final thing you need to do to protect yourself before you decline someone is just be able to demonstrate that this criminal offense is related specifically to the job that you have on hand and that it would pose a risk to

your organization, to the public, you know, to whomever. Um, and that's your final step. So just think about those three things to start the individualized assessment. Now, once you have decided, yes, I do want to rescend the job offer, you're going to start the ad the federal adverse action process, which I believe we're going to get into shortly. — So, I'm glad you mentioned that because can you start with what it is? So, what is the Federal Adverse Action Administration process and why you believe it's the number one compliance trap for employers related to background screening? I am actually going to answer the second part first and tell you why it's the biggest trap because I see it every day done wrong. We have I just cannot tell you how concerning this is and how active applicants are becoming again. You know, please remember it is the most latigious environment at least in the 15 years I've been in this industry. So what it is before you decline that applicant, you've gone through your individualized assessment either formally or informally and you say, "I'd like to decline that person. " You have to start with what is called a pre-adverse action letter. Now, why this is such a problem is because again, who is creating your letters? Did you Google for your letters? Did your employment law counsel create your letters? Is your screening firm providing your letters? Because if these letters have any information, just like the applicant forms that is incorrect, you are at risk, not your screening firm. Because remember, they're not obligated to keep them up to date, even though they should and good firms will. That due diligence is on you. Okay? So, first of all, your pre-adverse action letter should say, and literally, I could tell you this in my sleep, as you can see, I'm starting to want to stand up, folks. I'm wanting to get up on the stage. So the first thing it will say is you know um dear Christy we ran a background check on you. You gave us permission to run a background check on you on this date and we have decided at this time that we are inclined to decline you um for the position and now in many states this is becoming more of a thing and this didn't used to be a thing. You actually have to include the offense that affected your decision. this wasn't this way five years ago. And not every state requires that now, but more and more are. So, be aware of that. And if you're in a state where that is required, you know, you may see two misdemeanors and one felony, and you didn't care about the misdemeanors, so put the felony down. So, you specifically have to put down what that offense was. And then in the next paragraph, and this is something that's changed probably again within the last five years, there is specific language that tells that applicant that if there is anything else they would like to provide to the employer that may affect their decision, and that could include any number of things, character references, you know, I just kind of want to plead my case to you and tell you what happened. You have to formally put that in there and you have to provide a phone number. So, anybody that's like putting it to a 1-800 number that goes nowhere, you got to change that. You've actually ha you have to have a phone number where someone is reachable cannot use your email address. You've got to put your phone number in there. Okay? So, you've let them know that they have the opportunity to provide you with additional information that may affect your decision. and then the final paragraph. And I see mistakes in forms. I guarantee you folks, if I did a compliance review for half the people in this audience, 90% of them would have incorrect forms. That's how serious this is. So, the last paragraph in the pre-adverse action letter talks about the applicant's ability to dispute the report. We as consumers all have the right to dispute criminal record information. If you have if you're John Smith, you probably in your lifetime will have someone report a criminal record that may not be yours because that name is so common. So you have that protection that you can dispute a report. So if an applicant disputes a report, they get well, first of all, let me back up. They get the letter and they have a specific amount of days. So the amount of days they have, the federal rule is five business days. So if I send you the pre-adverse action letter on Monday, start counting on Tuesday. So Tuesday, Wednesday, Thursday, Friday, Monday, then you could send the second letter, the adverse letter, which we're going to talk about. But I just I want to say one more thing about pre-adverse. There are states and even some counties and municipalities that have a different amount of time. So, California, again, our special state, you have 5 days initially, but if that applicant

contacts you and says, "Uh, Christie, I would like to get together some information. I've got some character references. I've got something for my pro officer. You know, I want to, you know, put some more information together for you. " They have five additional days to do that. So, technically, you've got 10 days. New York City, there's an oddity that you've got three days only after you can verify that the applicant received the letter. So, you need to make sure that your background screening firm system, you know, does that. So, that's pre-adverse action. Okay, you've sent your letter. If you don't hear from that applicant or the U background screening firm doesn't contact you and say, "Hey, one of your applicants contacted us. They want to dispute this information. they say this is not their record, then you're good to go to the second letter, okay, the adverse action letter. And that letter wraps up your process. It says, you know, dear Christie, we notified you previously that we were inclined to decline you. We are now moving forward with that, you know, etc. But I have to stress you cannot add language to these documents. And I personally in my real job in background screening, I see clients asked to do this every day. And they have a reason, employers have a reason, you know, thinking, well, I'd like to also put in there, well, you know, we're sorry that it didn't work out this time, but in, you know, in six months, you know, please consider us again or, you know, no, no, no, no. This is not a document for you to have any other conversation with that person to start citing policies. These letters are very, very specific and wrong language will get you sued because again, you are federally violating a consumer's rights. Now, I want to talk about disputes real quick because that's the in the middle can happen process. So, if that applicant says this is not my record, they may contact you, the employer. If they do say contact the screening firm, okay? Because you don't have to deal with that. You want your screening firm to handle that. Um, typically because the screening firm's information is in the pre-adverse action letter, they will most likely call the screening firm, but if not, you just refer them down the road. Um, and so when that dispute takes place, a screening firm by law has 30 days to resolve a dispute. Honestly, that's way too long. Who's got 30 days to sit back and wait while you've got a job open? So, a good firm will typically take 3 to five days to wrap it up because what they are required legally to do is to reinvestigate that person's information. So, they will go back to the courts where they first obtained the information just to reverify if it was correct. Now, you would be shocked at the number of frivolous disputes we get where somebody thinks if they're just going to say, "Not my record, and I may sue you if you don't remove it. " Well, it's still your record. We checked and So, that's a valid dispute. But once the dispute is resolved and at the rate that some counties are expuning records now, Michigan Clean Slate Act, sometimes a record may be expuned or change disposition from the time the report was run to the time the employer decided to take pre-adverse action and notified, you know, the applicant received the letter and something may have changed. We do see that and sometimes courts even make errors and I have seen that as well. So you do nothing until that dispute is resolved and when the background screening firm will let you know and they will also let your applicant know. So please stop. Do not do anything. I have seen employers be sued, lose and pay chunks of money because come to find out the report was amended by the screening firm. They went ahead and hired candidate number two instead and gave away the job. And then the person came back and said, "Wait a minute, that record wasn't mine. Where's my job? " And they said, "We don't have a job for you anymore. We just assumed and you get sued and you lose is what will happen there. " And if I could just add one more thing that just popped in my head. I wanted to remember to tell you all. The biggest errors I see are people sending the first letter and thinking they're done, not realizing there is a second letter or someone sending the adverse letter without first sending the pre-adverse. And then I also see folks sending the pre-adverse and thinking, well, you know, just a couple of days should be enough time. No, you don't decide that amount of time between letters. it is a federal regulation. So those are the most common, you know, violations that I see and this is the number one area against employers being sued. So that's why this is so

important and why I rambled on a bit. — Well, and I can see that, right? Because there's very specific time there's a very specific timeline and steps that need to be followed. — Absolutely. So, Deb, what new compliance challenges do you see emerging in the background screening space that HR professionals should prepare for? — I'm scared deep and think about it. I don't even want to I just can't even close my eyes and think about it. No, I think it's going to be more of what we're already seeing with states and cities and counties making up their own rules because 10 years ago, I mean, that was not a thing. People I mean, it was like here's federal law. California had special things and that was it. But we are seeing it a lot more. So I think that is a very big area just more of that and um and again you know AI may be your friend in a lot of ways it is not your background screening friend do not use AI. So um I think that's probably just more of the same. Oh, I also, this is just my prediction, but I've been predicting this for several years, but I believe that credit using credit in the employment process, running a credit check, I think that is becoming more and more frowned upon as well. You can still do it in most states, even though there are some salary restrictions um of like $75,000 salary to do it, etc. But I think that as we move forward that there is more of an acknowledgment that someone's credit doesn't necessarily determine their ability to do a job or indicate that they're going to steal which is what you know why people really run credit. But I think credit rules are going to become more restrictive as well. That's just a prediction. Thank you so much, Deb, for joining us for this special episode of Honest HR. And thank you all for being a part of our live audience. That's going to do it for this episode of Honest HR. We'll catch you next time. Let's give De a round of applause. — Thank you everybody. — Hello friends. We hope this week's episode gave you the candid tips and insights you need to keep growing and thriving in your career. Honest HR is part of HR Daily, the content series from Sherm that delivers a daily newsletter directly to your inbox filled with all the latest HR news and research. Sign up at sherm. org/hraily. Plus, follow Sherm on social media for even more clips and stories. Like, share, and add to the comments because real change starts with real talk. term. This podcast is approved for 0. 5 professional development credits, also known as PDC's towards SHERM CP and Sherm SCP reertification. Enter the following PDC activity ID in your SHREM activity portal to log your credit. 2733 F2K. Again, the PDC code is 2733 F2K. This code expires June 1st, 2027.